Executive Pension question

T

trackdaychamp

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My partner has an Executive Pension with New Ireland (split over 3 funds) that our company pays into. We started in 2017 with €32k in there and it was always the plan to move it to an SSAP as soon as we had enough funds in there for the SSAP structure to make sense in terms of fees. In 2018 our company put in €21k and then €94k in 2019. We are looking at €53k this year. We are on 1% AMC with a net allocation of 103% which I believe is pretty competitive. We checked recently with New Ireland and there are exit fees of 5% in the first 3 years, 3% in year 4 reducing to 2% in year 5 and no penalties after year 5. So we are locked in now for a good few years unless we give New Ireland €7k. The funds are doing ok so we don't mind waiting but we are a bit sore about losing mobility.

We don't remember talking about exit fees when we sat down with him at our house. He is probably right in saying it was in the documentation but I believe he knew we always wanted to move to SSAP from day one. He says he thought it would take a long time to get to the fund to SSAP value. I feel I would definitely remember a 5 year lock in coming up. My questions are:
  1. Do we have to use a broker to put the next instalment into New Ireland? We're happy to pick our own funds...
  2. Would our existing broker have secured better fees for himself with the addition of the 5 year exit fees? Trying to figure out if it was an honest misunderstanding...
  3. Does the broker have a legal obligation to disclose all the fees he earned from New Ireland if we request same from him now?

Thank you
 
There is no commission disclosure on Executive Pension at point of sale.

You should have a suitability letter from the broker on why he recommended the product. I would think that there may be some reference to the exit charges in that.

The policy schedule from NI issued initially would have the AMC and exit charges stated on it.

The annual statement on the policy, from 2018 on, would have a Transfer Value and Fund Value on it. When there are exit charges you can see that the TV is less than the FV.

You can write to NI and ask them for the commission disclosure. They'll write to the broker and ask him if he wants to reply to you or if they should.

If there's an allocation rate of greater than 100% then there are usually exit charges. The only exception to that, that I can think of, is on an investment product where you might get 101% allocation to cover the cost of the Government Levy.

I'm not up to speed on the NI charging structures but I would guess that they have contracts without the early exit charges.

Again, I don't know if the increase from €32K to €94K means that €62K of that now has to run 5 years (from 2019) so that the penalty doesn't apply.

The broker on the scheme stays the same unless you change that.

If you want an Executive Pension without exit penalties (for the €53K and future contributions until you're ready for SSAP) ) you'd just have to set it up yourself, probably on an execution only basis.

Gerard

www.prsa.ie
 
Last edited:
GSheehy said:
There is no commission disclosure on Executive Pension at point of sale.

You should have a suitability letter from the broker on why he recommended the product. I would think that there may be some reference to the exit charges in that.

The policy schedule from NI issued initially would have the AMC and exit charges stated on it.

The annual statement on the policy, from 2018 on, would have a Transfer Value and Fund Value on it. When there are exit charges you can see that the TV is less than the FV.

You can write to NI and ask them for the commission disclosure. They'll write to the broker and ask him if he wants to reply to you or if they should.

If there's an allocation rate of greater than 100% then there are usually exit charges. The only exception to that, that I can think of, is on an investment product where you might get 101% allocation to cover the cost of the Government Levy.

I'm not up to speed on the NI charging structures but I would guess that they have contracts without the early exit charges.

Again, I don't know if the increase from €32K to €94K means that €62K of that now has to run 5 years (from 2019) so that the penalty doesn't apply.

The broker on the scheme stays the same unless you change that.

If you want an Executive Pension without exit penalties (for the €53K and future contributions until you're ready for SSAP) ) you'd just have to set it up yourself, probably on an execution only basis.

Gerard

www.prsa.ie
Click to expand...
Thanks Gerard. I appreciate you taking the time to reply. The fund is now at €162k and we have another €53k ready to go in shortly. I have contacted NI and asked about the possibility of inputting those funds without that broker (am I obliged to use a broker at all) and they have said they'll call me back but that was a few days ago so I'm still not sure on this one. Appreciate your help and will keep you in mind for future plans
 
If you put money into that contract again, the 5 year early exit penalties will kick in again on the new funds. You need to put the new money into a new contract with no early exit penalties. Believe it or not, most contracts have exit penalties.

On fees, your brokers gets 2% from New Ireland for a contribution. You get 3% from New Ireland. New Ireland recoup this through the 1% management fee over time. The purpose of the 5 years exits is that New Ireland are on the hook for 5% every time you put in money. They have to give themselves a minimum amount of time to get some of that money back.

For contracts with no early exits, don't expect an additional 3% allocation but you will also get a lower management fee (as they have no additional payments to recoup, the charge is lower. See how this works? ;) ).



Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thanks Steven & Gerard. We paid a separate financial advisor €3k last year to complete a financial plan. The plan is complete and we are happy. As a result of this plan the advisor set up multiple investment accounts with an insurance provider (Zurich). We pay €6k for each of our 2 kids so into a global 60/40 fund, 60% equities and 40% bonds. There are other amounts we are paying into funds as part of the advice but I'll use our kids funds as examples. The financial advisor was paid by us to provide the advice and I know he was also paid (trail fees etc) in selling the product as this was correctly disclosed at the time. Now we are on year 2 so I'm ready to put the next €6,000 in for each child. I don't know if it's right that I should be paying fees to the advisor on products where I've already paid for the advice. Maybe you will tell me that I'll pay the trail fees anyway, either to the Financial Advisor or an internal Zurich broker or is there a way I can have reduce my costs?

All the best
 
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